Why Japan's Buying Spree Boons Well for Investors

Instead of crawling out of bed this morning and heading to the coffee pot, I went straight for my filing cabinet. I had to check to see if my passport was still current and valid. After all, if I want to put my thumb on the pulse of the American economy I will have to head to Asia, especially Japan.

Tokyo’s banks and brokerage firms have been cutting checks as fast as they can sign them during the last day or so.

Most notably, Nomura Holdings (NMR) bought Lehman Brother’s (LEH) Asian, European, and Middle-Eastern operations. It got the strategic holding at an incredible price that will ensure the bank is competitive for decades.

Of course, its shareholders are not the only ones celebrating today. Mitsubishi Financial Group (MTU) grabbed a 20% share of Morgan Stanley, making it a major player on Wall Street.

Finally, one of Japan’s largest banks, Sumitomo Mitsui Financial Group, is soaring in value as it is about to dump several billion yen into Goldman Sachs, giving Warren Buffet some company as he counts his new shares.

The Asian Invasion

If you thought Asia was slowly creeping into the American economy and taking much of our superiority away, just wait. Japan’s leverage was just increased multi-fold. These banks have cash (to the tune of $15 trillion), low exposure to the subprime mess (less than $8 billion in losses), and now have their hands on a vital part of Wall Street at incredibly low prices.

A lot of short-sighted investors are mumbling this morning, “So what, the Asian economy is just as slow if not slower than America’s.”

They may be right, for now. But what happens in five or ten years when the world is on top of its next bubble cycle?

Japan now has a lot more leverage on its side. For a country like the United States that is about to expand its global debt to new heights and one that depends on Asia for just about anything that is cheap, more power in the hands of our competitors is far from a good thing. It is a very, very bad thing.

The repercussions of this Wall Street collapse will not end once Washington hands over its blank check. That will be just the beginning. Lehman Brothers and its fallen brethren are gone forever and Asia now has a permanent and strong presence on Wall Street.

As an investor looking for opportunities, it is important to start concentrating overseas. There are some great opportunities created by this market turmoil. Keep your eye on the Asia markets and buy when the chance arrives. We call it the “Omaha Principle“.

There are profits to be had. You just have to know where to look

Comments

[Francorp:]

See, sometimes it pays off when you bail out another economy for 50 years! Japan to the rescue!

2008 Sep 24 01:38 PM

[finmah@yaho...:]

Let's don't get carried away - the Japanese in the 80's and 90's had poor investments in real estate - including Pebble Beach

2008 Oct 07 06:38 AM